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STOCK AND BOND SCENARIOS

IRX Company just purchased a five year zero coupon Treasury bill at $900. If the face value is $1,000, what is the yield to maturity?

IBM’s last dividend was $3.00 per share for common stock. If the required rate of return on common stock, rs, is 11%, and dividend is expected to grow at a constant rate of 10% a year, what is the stock’s current value per share?

General Electric issued bonds that mature in 15 years at 12% coupon rate and a par value of $1,000. If the yield to maturity is 9%, at what price should the bonds sell?

ABC Company pays dividends of $2.00 per share for its preferred stock outstanding, and the required rate of return on preferred stock, rg, is 15%. Considering there is no growth in dividends, at what price should the preferred stock sell?

Lee Enterprises’ bonds currently sell for $1,200 with 12 years left to maturity. If the yield to maturity is 5.66% and the face value is $1,000, what should be the annual coupon payment?

Jones Key’s is expected to pay a dividend of $1.50 at the end of the year (that is, D1 = $1.50) and the dividend is expected to grow at a constant rate of 8% a year. If its required return is 12%, what is the expected price of the stock three years from today?

Last year IBM paid dividends of $2 per share on its common stock that currently sells for $70 per share. If investors expect earnings and dividends to grow at a constant rate of 10% in the future, what should be the required return on common stock?

If Exxon’s preferred stock pays a dividend of $15 per share and can be sold to the public at a price of $75 per share, what is the required return?

XYZ Founders Inc. has perpetual preferred stock outstanding that sells for $120 a share and pays a dividend of $12 at the end of each year. What is the required rate of return?

Brown Enterprises’ bonds currently sell for $1,250.  They have a 15-year maturity, an annual coupon of $65, and a par value of $1,000.  What is their current yield?

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